April 29, 1952 

Hon. Robert S. Calvert Opinion No. V-1442. 

Comptroller of Public Accounts 

Austin, Texas Re: Status of administrative fund established by the 

Social Security 

Act passed by the 

Dear Sir: 52nd Legislature. 

You have requested the opinion of this office 

on the following questions: 

“1. Does the second paragraph of 

Section 12 of House Bill No. 603, Regular Session of the Fifty-second Legislature, create a special fund & the 

state treasury? 

“2. The last sentence in Section 

12 reads: ‘These funds will not be 

State funds and will not be subject to 

legislative appropriation.’ Is this a 

valid provision? 

"3. If you should answer question 

number 2 in the negative, then does Section 13 of House Bill NO. 603, Acts of 

the Regular Session of the Fifty-second 

Legislature, appropriate the monies collected under the provisions of the Act to 

the Social Security Administrative Fund?” 

House Bill 603, Acts 52nd Leg., R.S. 1951, ch. 

500, p. 1480, title “Social S,ecurity - County and Municipal Employees,” (Article 695g, V.C.S.) was passed for 

the purpose of allowing county and municipal employees 

to participate In the Federal Social Security program. 

Under the federal act only the State, and not individual 

counties and municipalities, may enter into social security agreements with the Federal Agency. In order to comply with the requirements of the Federal Social Security 

Act the State Department of public Welfare was designated 
Hon. Robert S. Calvert, page 2 (v-1442) 

as the State agency to administer this act on behalf 

of the participants. This office held House Bill 603 

constitutional against a contention that the payments 

required by the participating counties or municipalities were gifts or grants of public money In violation 

of the Constitution. Att’y Gen. Op. V-1198 (195’1). 

The specific questions now before us were not involved 

in that opinion and hence were not considered. 

The provisions of House Bill 603 which give 

rise to your questions are the following: 

“Sec. 10. The respective governing 

bodies of the various counties or municipalities of this State which enter into 

agreements under this program are hereby 

authorized to pay to the State Agency, out 

of any available funds not otherwise dedicated, such amounts, separate and apart 

from employees’ contributions and matching 

contributions,~ as mav be agreed between the 

P res e t ve a d h State 

Aaencv to be necessary to finance the cougty’s or municioalitPs orooortionate share 

$n the administrative cost of this oroarat the State level, The State Asencv shall, 

reauire soecific undertakings to defray a 

r, ro or 0 at 

exoenses at the State level in agreements 

negotiated with counties and municioalitieg 

n any basis mutually nreeable between t& 

&ate Agency and the okticinatinz countv or 

municioality, whether as an annual fee for 

each participating county or municipality, 

an annual fee per employee covered, a percentage based upon the contributions to the 

Federal authorities, or any other equitable 

measure. Annually at the close of each fiscal year, the State Agency shall pay from 

the Social Security Adminlstratlon FWnd to 

the State Treasurer for deposit to the General Revenue Fond of the State of Texas an 

~amount not less than ten per cent (10%) of 

these contributions during the preceding 

year to defray administrative expenses until 

such time as the amount appropriated to the 

State Agency from funds of the State for administrative purposes has been reimbursed in 

full, at which time such payments shall cease. 
Hon. Robert S. Calvert, page 3 (V-1442) 

llSec. 12. . The State Agency shall 

deposit all mone;s’collected under the provisions of this Act from participating counties 

and municipalities to defray the cost of, administering this program at the State level 

In a special fund to be known ashih; 

Security Administration Fund. T 

Fcial 

t te Treasure sh al 1 be treasurer and custodian o f thq 

:$.,;kich shall be held secarate and ao $ 

m 

The State Tieasurzr shall administer this fund 

DU lit m nevs or funds of this S&q 

in accordance with the directions of the State 

Agency. Moneys deposited in either, of these 

special funds shall be disbursed upon warrants 

issued by the Comptroller of Public Accounts 

pursuant to sworn vouchers executed by the 

State Agency acting through the executive director of personnel of the agency to whom he 

will not be State funds and will not%?%!@ 

expressly delegates this function. 

to leaislative aacrooriatio~. 

“Sec. 13. The State Agency is authorized 

to expend moneys in the Social Security Administration Fund for any purpose necessary to 

carry on the administration of this program at 

the State level including but not limited to 

salaries, trave i lng expenses, printing, stationery, supplies, equipment, bond premiums, 

postage, communications, and contingencies, and 

the State Agency is authorized to employ such 

personnel, purchase such equipment, incur such 

expenses as may be necessary to carry out the 

administration of this program at the State 

level, provided all salaries and expenditures 

from this fund shall be consistent with the letter and spirit of comparable items and general 

provisions inthe general departmental appropriation bill then current. (Emphasis added.) 

The main question for decision concerns the 

validity of the above provisions in House Bill 603 relating to the safe-keeping and handling of the administrative fund. In this regard, the Supreme Court has 

said: 
Hon. Robert S. Calvert, page 4 (v-1442) 

'I . . . It is academic to say the 

Legislature has the power to pass any 

law which its wisdom suggests that is 

not forbidden by some provisions of the 

Constitution. ad citv of 

11.8 Tex: 58in6 E.W.2:*738, 740 

The constitutional provision drawn into controversy in answering your questions is Section 6 of 

Article VIII, which provides: 

“Ho money shall be drawn from the 

Treasury but in pursuance of specific 

appropriations made by law; nor shall any 

appropriation of money be made for a 

longer term than two years except by the 

first Legislature to assem i le under this 

Constitution, which may, make the necessary appropriations to carry on the government until the assemblage of the slxteenth Legislature.” 

The case of piedman Am 

of New York, 137 Tex. 149 151 iIW.2 

that the trust fund established by t 

butions of employees and employers under the Unemployment Compensation Act was not a state fund and hence 

was not in the Treasury subject to appropriation by the 

Legislature, although the trust fund was held by the 

Treasurer. The Friedman case however, dealt only with 

the main trust fund, and not ihe administrative fund 

which Is the fund giving rise to the problems before us. 

In order to answer your questions It is necessary to analyze the Social Security Act passed by the 

Fifty-second Legislature. Under the provisions of this 

act, counties and municipalities enter into Social Security agreements with the State Agency on a voluntary 

basis. The whole plan is based upon contracts between 

the State Agency and the participating counties and municipalities. one of the contractual agreements is to the 

effect that the State Agency will administer the act on 

behalf of the participants, but at their expense. The 

participants each agree to share a pro rata part of the 

expenses of administration and in return the State 

Agency acts as the liaison body between the participants 

and the Federal Agency. The State Agency has been given 

the authority necessary to comply with Federal requirements, but by contract all the counties and municipalities 
. - 

Hon. Robert S. Calvert, page 5 (v-1442) 

participating in the plan share 

expenses. 

the administrative 

We think it is clear that the money contrlbuted by the participants and held by the State Agency 

to defray administrative expenses never becomes “State 

funds” in the sense that they could be placed in general revenue and appropriated by the Legislature. These 

funds remain county and municipal property and the 

State Agency holds them as trustee until they are expended, since the participants have contracted to bear 

the administrative expense. If an excess were to be 

established in this trust fund, the Legislature could 

not appropriate it for any other use. Such an act by 

the Legislature would violate the portion of Section 

1.6 of Article I of the Texas Constitution relating to 

ImpaIring the obligation of contracts. Johnson v. 

Smith, 112 Tex. 222, 246 S.W. 1013 (1922). 

In light of the above analysis, you are advised that the administrative funds are not State funds, 

and therefore are not subject to appropriation. The 

special trust fund Is not placed In the State Treasury, 

but by statute the Treasurer is made custodian of the 

fund. Undoubtedly the Legislature may place such an 

added duty u on the Treasurer. 

Tex. 175, 1l.c S.W.2d 216 (1938). 

Eanlon v. Lockhart, 131 

The administrative trust fund established 

under the revisions of the,Social Security 

Act (H.B. ‘ii 03, Acts 52nd Leg., R.S. 199, ch, 

500, p. 1480) is a fund provided, pnrsuant to 

contract, by the. pqtlcipating .counties~ and 

municipalities. lithe trust ~3’und’is not ‘a state 

fund and is therefore not subject to approprlation by the Legislature. The fund Is ‘not placed 

in the State Treas~.~,‘~:hmt~the Legislature has 

merely made the Treksurer custodian of it. 

APPROVED: 

C. K. Richards 

Trial & Appellate Division 

E. Jacobson 

Reviewing Assistant 

Yours very truly, 

-PRICE DAEIEL 

Attorney General 

Charles D. Mathews 

First Assistant 

EWT:wb